once called a “cancer,” in a new design for a computer chip for toys, household appliances, industrial machinery and millions of other internet-connected devices.

A lack of security features on such microcontroller chips allowed hackers in 2016 to use more than 300,000 devices to launch the widespread denial-of-service attack dubbed Mirai.

Microsoft’s embrace of Linux is another a sign the company under CEO

Satya Nadella

is moving past the Windows era.

Mr. Nadella last month reorganized the company around its growing Azure cloud-computing operations and its Office productivity business. In doing so, he downgraded the role of Windows, the foundation of Microsoft’s success for much of its 43 years.

and others. The global market for microcontroller chips that can connect to the web—roughly one-eighth of the overall microcontroller-chip business—hit $2.2 billion last year, said Tom Hackenberg, a principal analyst with the research firm,

Microsoft used Linux because even the most scaled-down version of Windows won’t fit on thumbnail-size microcontroller chips. Its engineers added security features the company developed to the Linux “kernel,” the core elements of the operating system.

Later this year, manufacturers can buy the chip with a service that monitors threats and updates with the latest patches for 10 years. The bundle, called Azure Sphere, will cost less than $10 a device, though the company declined to be more specific.

a chip maker based in Taiwan, said it is willing to use the design because the company lacks experience developing and updating security services. Microcontroller chips that can connect to the web cost about $3 to $5 apiece, and the new design will add “a dollar or two at most,” said MediaTek vice president Finbarr Moynihan.

That cost is negligible for Microsoft customers such as luxury-appliance maker Sub-Zero Group Inc. The company is putting the chips in its ranges and refrigerators that send mobile-phone alerts and provide diagnostic data.

Azure Sphere is less likely to appeal to companies that make inexpensive connected gadgets with thin profit margins, such as baby monitors or toys, where consumers are more price sensitive, said Saniye Alaybeyi, a research director for Gartner Inc.

Microsoft made the chip design open, giving customers the ability to buy the chip but then connect to security services on their own servers or from another cloud provider. This isn’t the first time the company has worked with Linux, but the Azure Sphere chip is the first product Microsoft has built exclusively on the open-source software, the company said.